Easier Fatca reporting for MF investors

Any financial institution failing to comply will have to pay a 30% penalty on all its US revenues

Mutual fund (MF) investors with multiple accounts among different fund houses will not have to go to these individual funds to give the details regarding their compliance with the Foreign Account Tax Compliance Act, a US law on which the government has signed a cooperation agreement.

Any financial institution failing to comply will have to pay a 30 per cent penalty on all its US revenues, including dividend, interest, fees and sales.

Investors under this ambit may now update details with one or more of the four registrar & transfer agents (RTAs) or simply through MF Utility, a centralised distribution platform. Until now, investors had to download the Fatca declaration form from the websites of individual fund houses and then present it to the office of the fund house or any of its point of sales or online.

The four major RTAs are CAMS, Karvy, Franklin Templeton and Sundaram BNP Paribas Fund Services. CAMS and Karvy have nearly 90 per cent of all folios (accounts) registered with them.

Suppose an investor has 10 folios. When s/he registers and opens an account at MF Utility, a common account number or CAN is activated. This has all the information pertaining to the portfolios and once the Fatca details are given, it would be sent to the respective fund houses for updation. Beside KYC and Fatca details, CAN holds income details, mode of holding, details of the primary holder, multiple bank accounts, depository account details, power of attorney, etc.

“We have opened 18,000 CANs and see close to Rs 200 crore of assets is transacted through us,” said V Ramesh, managing director, MF Utility. However, only 25 fund houses are registered with it.

Fatca was introduced in 2010, to curb offshore tax evasion by US entities and citizens. The guidelines require foreign financial institutions receiving money from US investors to report the offshore holdings of those investors to American tax authorities. These institutions have to make various declarations, such as names and addresses of the investors and details of their balances, receipts and withdrawals.

Fund houses have to conduct the Know Your Customer compliance requirement for this purpose.The Fatca details need to be collected from those investors who have opened accounts on or after July 1, 2014, and those having an account whose value was above $50,000 as on June 30, 2014.